Assessing the Contribution of Carbon Emissions Trading in China to Carbon Intensity Reduction

DAI Hancheng, Toshihiko Masui

Abstract

This paper assesses the impacts of emissions trading between Jiangxi Province and the Rest of China on the carbon prices, total cost of carbon reduction and GDP loss using a two-region provincial Computable General Equilibrium model developed for China. The results reveal that without emissions trading, the carbon prices in 2020 would be 46.8 US$ in Jiangxi Province and 23.2 US$ in the rest of China, leading to GDP loss of 1.07% and 0.79% respectively. However, if emissions trading is allowed between provinces, Jiangxi Province needs to import CO2 emissions allowance from the rest of China. In 2013, the trading amount is 14.30 million ton or 7.84% of total CO2 emissions of Jiangxi Province. In 2020, the trading amount triples as compared to 2013, to a level of 44.85 million ton, accounting for 19.37% of Jiangxi’s total emissions. The results also reveal that the total costs of Jiangxi Province and the whole China would fall due to emissions trading, which is consistent with the theoretical implications. It is found that in the case of emissions trading, the GDP loss in 2020 would be lower for Jiangxi Province, at 0.36% instead of 1.07%.

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